Question

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Budgeted unit sales	12,000	13,000	15,000	14,000

The selling price of the company’s product is $19 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $72,200.

The company expects to start the first quarter with 2,400 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 2,600 units.

Required:

1. Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.

2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.

3. Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.

Answer 1

Jessi Corporation Sales Budget For the upcoming fiscal year Quarter-1 Quarter-2 Quarter-3 12,000 13,000 15,000 $19 $19 $19 $228,000 $247,000 $285,000 Budgeted unit sales Unit selling price Budgeted sales, dollars Quarter-4 For the Year 14,000 54,000 $19 $19 $266,000 $1,026,000 NOTE: Budgeted unit sales for Quarter-1 = 12000 x $19 = $228000; for Quarter-2 = 13000 x $19 = $247000; for Quarter-3 = 15000 x $19 = $285000; for Quarter-4 = 14000 x $19 = $266000; For the Year = 54000 x $19 = $1026000. 2) Jessi Corporation Expected Cash Collections For the upcoming fiscal year Quarter-1 Quarter-2 Quarter-3 $72,200 $148,200 $68,400 $160,550 $74,100 $185,250 Beginning balance collected Quarter-1's sales collected Quarter-2's sales collected Quarter-3's sales collected Quarter-4's sales collected Expected cash collections Quarter-4 For the Year $72,200 [Given that all of this will be collected in Quarter-1] $216,600 (Quarter-1 = $228000 x 65%; Quarter-2 = $228000 x 30%] $234,650 (Quarter-2 = $247000 x 65%; Quarter-3 = $247000 x 30%] $85,500 $270,750 (Quarter-3 = $285000 x 65%; Quarter-4 = $285000 x 30%] $172,900 $172,900 [Quarter-4 = $266000 x 65%] $258,400 $967,100 $220,400 $228,950 $259,350

Budgeted unit sales Add: Desired Ending Inventory Total production needed Less: Beginning Inventory Budgeted unit production Jessi Corporation Production Budget For the upcoming fiscal year Quarter-1 Quarter-2 Quarter-3 12,000 13,000 15,000 2,600 3,000 2,800 14,600 16,000 17,800 2,400 2,600 3,000 12,200 13,400 1 4,800 Quarter-4 For the Year 14,000 54,000 2,600 2,600 (Quarter-1 = 13000 x 20%; Quarter-2 = 15000 x 20%; Quarter-3 = 14000 x 20%] 16,600 56,600 2,800 2,400 [For each quarter, respective previous quarter's end. inventory will become beg. Inventory] 13,800 54,200 PUU